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PZU SA plans to review its strategy to bolster earnings as last year’s profit collapsed to the lowest since its debut in Warsaw in 2010 after being rocked by record-low interest rates.
Under Chief Executive Officer Michal Krupinski, who took the post in January, Poland’s largest insurer is seeking to slash costs by a fifth, increase its share of insurance premiums generated outside Poland as well as boost its assets under management almost by half through 2020, according to the assumptions of the strategy outlined at a press conference in Warsaw on Tuesday. The insurer will publish its revised plan in the middle of this year.
“We want to reverse the negative trends we’ve seen in the past years and PZU will focus on its core business now,” Krupinski, a former executive at Bank of America Inc. and deputy treasury minister, said on Tuesday. “Our main goals include improvement of profitability, returning to growth path and investing in innovation.”
This marks a slight departure from the previous management approach, which sought to boost returns by expanding beyond the company’s so-called core business into banking and health-care services, as well as by diversifying its investment portfolio away from the government bonds. PZU’s earnings have been under pressure in the past years from diminishing borrowing costs and falling valuations on the Warsaw stock exchange. Net income dropped 21 percent to 2.34 billion zloty [$606 million] last year.
Government-controlled PZU plans to carry on an expansion outside Poland organically and through acquisitions in central and eastern Europe and elsewhere, Krupinski said. His goal is to boost its share of premiums generated abroad to above 20 percent in 2020 from 7.4 percent last year. While the company seeks to improve its profit already this year, its return on equity won’t exceed 20 percent in 2016, Chief Financial Officer Przemyslaw Dabrowski told reporters on Tuesday.
PZU will leave banking expansion to Alior Bank SA, in which it bought a controlling stake last year, and will “support” takeovers of lenders if “this will be the unit’s plan,” according to Krupinski. The insurer will “analyze carefully” any potential purchases proposed by Alior as PZU CEO expects further consolidation of the Polish banking market.
PZU is also working on a new dividend policy as it needs to comply with Solvency II capital requirements. The new guidance, which will be presented in the second half of this year, won’t apply to a payout from 2015 profit, the CEO said.
–With assistance from Maciej Martewicz.